Asia marine fuels struggle with new water standards

Singapore, Jan 5 | Updated: Jan 6 2006, 05:30am hrs
Most Asian marine fuel suppliers are unable to meet stricter standards that require a lower percentage of water in bunker fuel, creating a premium for parcels that meet the grade, industry sources said on Thursday. Under the new international specifications, which came into force on Jan. 1, the water content in shipping fuel must be limited to 0.5 percent from 1.0 percent, enhancing its value to users, although the water has no adverse impact on ship engines.

I wouldnt want to be paying for 10 tonnes of water for every 1,000 tonnes of bunkers that I buy. At $300 a tonne, for example, thats a good $3,000 for water, which is pretty silly if you ask me, a Singapore-based European shipowner said. Incoming fuel oil cargoes from the Russian Black Sea ports, which account for about 20% of the January Western arrivals, have a water content of at least 1.5%.

Most of the independent suppliers, whose source of bunkers comes from blending fuel oil cargoes into spec, have declared to their customers that they are unable to meet the new requirements until after the first quarter at the earliest, a Singapore-based Western fuel oil trader said. The water content in the source cargoes are just too high to be blended to 0.5%. The cargo suppliers, especially those from Russia, are guaranteeing at best 1.5 percent water. Traders expect parcels that meet the new requirements to command a premium over the norm at least in the first quarter. However, they also expect most shipowners to continue accepting cargoes with 1.0 percent water content by mutual consent.

Contracts have been re-tailored to reflect sellers inability to meet the new ISO guidelines. Suppliers said as long as shipowners are aware of the quality of oil they are buying and do not complain, the status quo on water can remain despite the compulsory requirements.